Oil reclaims $94 as traders eye supplies

SAN FRANCISCO (MarketWatch) — Oil futures climbed on Wednesday, rebounding from the more than five-month closing low it saw in the previous session, as traders placed their bets ahead of weekly reports that are expected to reveal an increase in last week's U.S. crude supplies.

Crude futures for December delivery (CLZ3)  rose $1.15, or 1.2%, to $94.19 a barrel on the New York Mercantile Exchange, rebounding after a loss of 2.2% on Tuesday.

Weekly supply data from the American Petroleum Institute is slated for release at 4:30 p.m. Eastern time. A more closely watched petroleum-supply update will be released by the U.S. Energy Information Administration on Thursday at 11 a.m. Eastern. The reports on supplies were each delayed by a day due to Monday's Veterans Day holiday.

A Platts survey of analysts projected a 1.8-million-barrel rise in U.S. crude inventories for the week ended Nov. 8. Gasoline supplies, however, were predicted to fall by 1.2 million barrels, while distillate stocks — which include heating oil — were also seen down 1.2 million barrels, Platts said.

While expectations for further gains to crude supplies helped weigh on oil Tuesday, Platts also cited Oil Outlooks president Carl Larry as saying the consensus could well be wrong.

"It's looking like we're going to start refilling a lot of those refineries that have been more in hibernation than they have been in turnaround," Larry said in a Platts news release.

Brent rallies too

On the ICE Futures exchange, December Brent crude (UK:LCOZ3) improved by $1.21, or 1.1%, to $107.02 a barrel, ready to erase its 0.6% loss on Tuesday. The December Brent contract was set to expire at the close.

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"U.S. oil prices were bid higher today on a wider Brent-[West Texas Intermediate crude] spread influenced partly by supply concerns affecting Iraq and Libya of course," said Richard Hastings, a macro strategist at Global Hunter Securities.

The difference between the two types of crude oils was near $13 a barrel but they were climbing in unison Wednesday. The spread had topped $14 recently — a level not seen since April.

But a weaker dollar helped provide a boost for both types of the dollar-denominated crudes on Wednesday.

The greenback fell against the British pound (GBPUSD)  after the Bank of England signaled that it could reach its 7% employment threshold for raising interest rates sooner than expected.

Comments from Peter Praet, a member of the European Central Bank's executive board, caused the euro to swing widely. In an interview with The Wall Street Journal, published Wednesday, Praet emphasized that negative interest rates or asset purchases were still possibilities to boost inflation.

The suggestion of negative interest rates should pressure the euro and pull the U.S. dollar index (DXY)  higher — and commodities lower, said Darin Newsom, senior analyst at DTN, a commodity-market research company. But traders aren't looking at all of these factors, he said. Instead, "the driving force in crude oil is investors covering some of their short positions."

On Nymex Wednesday, gasoline futures also bounced back after their recent decline. December gasoline (RBZ3)  tacked on 4 cents, or 1.7%, to $2.63 a gallon. At the retail level, U.S. prices ticked higher for the first time in 12 days, after prices earlier this week dropped to their lowest in about 33 months.

December heating oil (HOZ3)  was up 4 cents, or 1.4%, at $2.89 a gallon after dropping 1.3% on Tuesday.

"You have to consider the very near-term boost from cold weather in the U.S. indicating a slight uptick to consumption of distillates," said Hastings. Distillates include heating oil.

Bloomberg

Futures prices for natural gas, however, pulled back after Tuesday's 1.2% gain on colder-than-normal temperatures for the Eastern U.S. The EIA will issue its weekly update on natural-gas supplies as usual on Thursday at 10:30 a.m. Analysts polled by Platts are looking for a supply increase of between 20 billion cubic feet and 24 billion cubic feet.

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December natural gas (NGZ13)  was last down 2 cents, or 0.6%, to $3.60 per million British thermal units.